Mano River starts to flow

Mano River Resources is poised to start generating value from an attractive portfolio of iron ore, gold and diamond assets in West Africa. An investment deal last year provided funding and third party validation of its principal project, and Mano has just announced a merger with African Aura Resources that will let it apply its expertise to similar projects in a new African territory.

The company's iron ore project is the vast Putu Range deposit in Liberia that spreads along a 13km ridge. Management believes this could contain as much as 900m tonnes of iron ore grading around 40 per cent. Although relatively low grade, the scale is massive and would make Putu Range a world-class deposit.

In May 2008, Mano sold a 61.5 per cent stake in Putu Range to Russian steel and mining giant, SeverStal. This injected Mano with capital and introduced a substantial partner with expertise in exploiting low grade iron ore deposits. A 27km drilling programme was recently completed and Mano plans to release a resource statement compliant with international standards in August. The next stage would be to complete a pre-feasibility study, possibly in the second half of next year. This is likely to estimate capital costs of the project of around $2bn (£1.2bn), as a port and railway line need to be constructed along with the mine. On commencement of production, Putu Range should create thousands of jobs in an area of eastern Liberia that currently enjoys little economic activity.

Mano's most advanced gold project is New Liberty in Liberia. The current estimate of gold resources is 1.4m ounces, which offers the potential for a medium-sized mine. Recent deeper drilling has revealed that the resource could be significantly larger, which has forced Mano to revise its development plans. It now aims to drill further, increasing the gold resource, before releasing an updated feasibility study, probably in early 2011. This is likely to recommend an open pit followed by what would be Liberia's first underground mine.

Admittedly, Mano suffers from an image of making slow progress on its developments and having been impacted by civil strife. Liberia suffered civil unrest earlier this decade, which unavoidably leaves a legacy of heightened investment risk. A proposed name change following the merger with Canada-listed African Aura plus the current developments will hopefully reverse the image of inactivity. African Aura owns the Nkout iron ore and Batouri gold deposits in Cameroon together with a spread of exploration assets. These offer technical and operational synergies with Mano's iron ore and gold projects, albeit at an earlier stage of development. Mano will be able to apply both its and SeverStal's expertise, and a strong cash balance on completion of the merger, to further their development.

Mano also holds 59.62 per cent of Stellar Diamonds, which has two advanced projects: Kono in Sierra Leone and Mandala in Guinea. The collapse in diamond prices forced Petra Diamonds, Mano's partner on Kono, to reduce its involvement in the project, which may allow Mano to consolidate its 49 per cent holding. The Mandala alluvial project in Guinea produced for a full month for the first time in June, and early signs from auction are encouraging. Mano could potentially spin-off its diamond division once diamond and capital markets improve sufficiently.